Divorce can impact your life in many ways, including financially. Though you may not realize it, your credit score is one area that can experience big changes due to a divorce, changes that you should be prepared for and take action to improve. To find out more information about the relationship between credit scores and divorce, keep reading.
Why does divorce hurt your credit?
Those going through a divorce often, though not always, suffer a drop in their credit scores. One reason is that your income frequently drops. Rather than including your spouse's income, you must now report only your own, something that could make you a greater credit risk post-divorce. Additionally, debt levels are likely to increase while your assets could fall dramatically given the equitable division process. Finally, if one spouse decides not to pay a jointly owed debt, then the harm will be shared by both of you, not just the one with responsibility.
Why does your credit score matter?
Though those going through a divorce have lots of things on their minds, it is important that your financial future and, more specifically, your credit score, be one of them. The reason is that credit scores can impact your ability to buy a home, rent an apartment, purchase a new vehicle, get access to credit, find good insurance rates, and even get a job. Your credit score acts as your financial report card, something that can make your life easier or much harder, depending on how high or low it is.
What can you do to improve your credit score after a divorce?
The most important thing you can do to improve your credit score is to continue paying your bills on time. Late payments or bills that are turned over to collection can wreak havoc on a credit score and should be avoided at all costs. Another important step to boosting your credit score is to establish new lines of credit in your own name. These new accounts will reflect your own ability to handle bills and will eventually lead to a rise in your score. Finally, consider closing joint accounts. By keeping these open you only expose yourself to more risk that your former spouse will run up charges or fail to make a payment.